Treasuries trimmed losses earlier after the Commerce Department said U.S. household purchases, which account for about 70 percent of the economy, grew 1.5 percent in the second quarter, versus a previously reported 1.7 percent. An index of pending home resales fell 2.6 percent in August after a revised 2.6 percent gain in July, figures from the National Association of Realtors showed today in Washington.
The five-year, five-year forward break-even rate, a measure of the inflation outlook the Fed uses to help guide monetary policy, was 2.7 percent on Sept. 24, down from a 13-month high of 2.88 percent on Sept. 14. The 10-year average is 2.75 percent.
The central bank announced on Sept. 13 plans to buy $40 billion of mortgage securities a month in a third round of quantitative easing as it seeks to spur economic growth and lower a jobless rate stuck above 8 percent since February 2009. It said it would continue the purchases until the recovery is well-established.
A measure of relative yields on mortgage securities that guide U.S. home-loan rates was near a record low today amid bets the Fed will find a shortage of the bonds as it expands purchases. A Bloomberg index of yields on Fannie Mae-guaranteed mortgage bonds trading closest to face value was 60 basis points higher than an average of five- and 10-year Treasury rates. The record, 55 basis points, was reached Sept. 25. The 2012 average is 135 basis points.